The EU-Mercosur Agreement: A Story with a Happy Ending?

EU-Mercosur Trade Agreement: Opportunities and Challenges

EU-Mercosur Trade Agreement: Opportunities and Challenges

The trade agreement between the EU and Mercosur states could be advantageous for both sides, eliminating high import tariffs. However, the ratification of the document is at risk.

Illustration of trade discussions between EU and Mercosur states.
Efforts for the EU-Mercosur trade deal span over two decades.

A Milestone in Trade Negotiations

After nearly 20 years of negotiation, the European Union and Mercosur states — Brazil, Argentina, Uruguay, and Paraguay — reached a political agreement in June. This “agreement in principle” aims to foster growth and job opportunities on both sides. However, ratification remains uncertain, as several nations have expressed reluctance to sign the deal.

The Economic Importance of the Agreement

The EU is Mercosur’s largest trade and investment partner, exporting €45 billion in goods in 2018 and €23 billion in services in 2017. Additionally, the EU holds a €381 billion foreign investment stock in Mercosur. For the EU, eliminating trade barriers, particularly for smaller companies, is a key objective. The agreement could remove tariffs on 91% of EU products, saving up to €4 billion annually. For instance:

  • Cars: current tariff of 35%
  • Machinery: tariffs between 14% and 20%
  • Chemicals: tariffs up to 18%

Challenges to Ratification

Despite its benefits, the agreement faces significant resistance:

  • Amazon Rainforest Fires: France and Ireland threatened to veto the deal unless Brazil commits to stronger environmental protections.
  • Austria: A parliamentary subcommittee voted against ratification, with four out of five parties opposing the agreement.
  • EU Farmers: The COPA-COGECA organization has raised concerns about competition from Mercosur agricultural exports.
  • Brazil’s Environmental Policies: President Jair Bolsonaro’s stance on the Paris Climate Agreement and limited efforts to curb Amazon deforestation have drawn criticism.
  • Argentina: Newly elected President Alberto Fernández has expressed interest in renegotiating parts of the agreement.

Given these obstacles, the future of the EU-Mercosur agreement remains uncertain.

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